Reverse Mortgage — Beer, Donuts & Golf


Massachusetts lawyers act as title companies in virtually all real estate transactions in Massachusetts. This has been the case for several hundred years. Not to bore you with history, but I need to set the scene, it all goes back to the China Trade when wealthy merchant marine captains would set out for years long voyages in search of fortune. While they were away they entrusted their Boston lawyers to conduct their business for them with the banks and protect their families generally. This led to lawyers in Massachusetts taking on the role of trustee for wealthy families, but also put them firmly in control of the transfer of real estate and bank relations. Until recently the Massachusetts Real Estate Bar called it "conveyancing", I guess to make it sound more British.

Whatever the case, lawyers as title companies and corporate title companies in most other states developed rapidly after World War II due to the large number of returning veterans seeking the American Dream. As mortgage lending became more commonplace and title insurance more lucrative for title insurance agents, lawyers embraced conveyancing as a money making practice area. For the first several hundred years of real estate closings in Massachusetts conveyancers were highly skilled technicians who were able to interpret the often cryptic records of land ownership left to us by our ancestors. It was tedious and persnickety work. The fees were based on the work performed by the lawyer and a lawyer could make a good day’s wage for drafting mortgages and recording deeds.

In the early 1970’s title insurance became a required element for most mortgages. Title insurance for the most part is an assurance to a mortgage lender that it is in first lien position on a particular parcel of land on which it has placed a mortgage lien. In its simplest form title insurance is what enables the American financial community to provide ready capital and reasonable rates to the market place as it helps to commoditize mortgages so they can be converted into financial vehicles on Wall Street. The basic protection of title insurance is vital and beneficial to both mortgage lenders and their customers. In Massachusetts, virtually all title insurance is sold by lawyers as agents for the major title insurance underwriters, companies include: Ticor Title Insurance – Fidelity Financial; Stewart Title; Old Republic; LandAmerica (Lawyers & Commonwealth brands); and Talon Group – First American. Each of these companies offers a similar product developed in cooperation with the American Land Title Association which serves as the trade association for the title insurance industry.

Boy, this is really boring. Where’s the beer, donuts & golf?

Title insurance is sold in Massachusetts based on a formula of coverage per thousand dollars of loan amount or purchase price. There are essentially two core products, lender title insurance to protect the lender’s interest and owner title insurance to protect the home owner’s equity in the real estate. There are a few other bells and whistles, but it is essentially a vanilla product for consumers. Title insurance in Massachusetts is underwritten by lawyers by virtue of completing a title examination and reviewing the summary or title abstract to assess risk. Title insurance is paid for by the consumer as part of the closing costs. The other major closing cost paid by the consumer for title services is ordinarily paid in the form of an attorney fee. In my 17 years of working in the mortgage and real estate industries in Massachusetts not only has this fee decreased in nominal terms, but taking inflation into account it has actually decreased by more than 50%. Did he say attorney fees have decreased by 50% in real terms over the past two decades? Yup. What gives?

Title insurance agents are paid a commission for underwriting and selling title insurance. A big, big commission. In Massachusetts, lawyers are paid an average of 70% of the title insurance premium in addition to their attorney fee. Lenders direct which lawyer will conduct which real estate closing. Lawyers who do closings have become specialized in handling large volumes of real estate transactions thanks to the Internet (for searching records) and transaction management systems (like the company I co-founded, E-Closing) to e-recorded (like the other company I co-founded, SimpliFile). It can be a very financially rewarding business in Massachusetts, just like in the rest of the states where most closings are conducted either directly by the title insurance companies or by corporate style companies (not lawyers). Closing lawyers want to close loans quickly, efficiently and profitably. You said there would be beer, where’s the beer?

Due to a number of factors, such as the large number of law schools in Boston, the overall high profit in closing mortgage loans and the relative ease of entry into the closing business; conveyancing is a highly competitive business in Massachusetts. The most successful closing lawyers are expert marketers who can swing a golf club with bankers and tell great stories at the 19th hole (NOTE: for those that don’t know, the 19th is where the beer can be found). They have attractive and persuasive staff calling on their customers with donuts and smiles, not unlike those Pfizer or Merck representatives with the trays of sandwiches and freebies for doctors. There is nothing wrong with any of this, it’s how the forward mortgage and closing business is done. In addition, the lawyers will send potential borrowers to the lenders that they work with as a way to keep the skids greased and to show good faith in the relationship. The lenders rely on referrals from their closing lawyers in many cases make it a declared ab into to any new business.

My law practice includes, as you would expect, a significant number of mortgage lenders and banks that hire me to develop strategies for reverse mortgages, automate closing processes and conduct training programs for loan and branch staff. A few weeks back I was asked to meet with one of the leading mortgage companies in the Northeast (by dollar volume) to discuss making them a market leader in reverse mortgages. We discussed my role in marketing, training, product selection, etc. As compensation we discussed my role conducting reverse mortgage closings in the states where we are licensed for the title business (MA, NH, ME, RI, NY). I explained how my law firm has special expertise in this business. We treat reverse mortgage closings very differently than conventional mortgage closings. This is due, more than anything else, to the fact that we consider ourselves elder law lawyers first and not only lawyers engaged in the business of closing mortgage loans. We add significant value to every mortgage loan that we close through compassion, experience and patience.

A reverse mortgage closing should be unlike any other closing. First, we assist the borrower with understanding their estate planning and asset protection planning issues. Then, we evaluate their government benefits to determine the appropriate lending program and to counsel them on potential traps in the reverse mortgage lending process that may lead to adverse consequences. We call borrowers in the morning when they are most awake and can understand what we need from them. We plan two hours for each closing. We show up on time. W e s p e a k s l o w l y. AND LOUDLY. We bring felt tip pens to make signing easier for arthritic hands. We enlarge the document copies so tired eyes can actually read them. We speak English. We welcome them to have their children or best friend at the closing. We stop to drink the tea and stale cookies that we are offered. We ask about that Army medal proudly hung above the mantel. We touch their hands when they tell their life stories. We tell them out our kids and where our parents grew up. We tell them to call us if they have any questions (and we mean it). We bring their first disbursement checks to their bank for them and call so they don’t worry about it getting in the bank. We thank them for their time.

The big mortgage company said that my thoughts on the subject were quaint but that "business is business" and they didn’t have the time to coddle every borrower. "We need to fill the pipeline and get these numbers up, we want to be number one!!" "Ever read the Lorax by Dr. Seuss?", I thought to myself. They decided that they would continue to use the golf buddies of the company founder for closings, because, I quote "they will be able to refer us the reverse mortgage business to help us grow, our closing lawyers get business because they give us business and close deals no matter what." Ouch. Where are they going to find impoverished elders? The golf course. When elders consider borrowing on a reverse mortgage many emotions become part of the equation. A good friend in the reverse mortgage business (he is actually "number one" in my book) always says "reverse mortgages are not sold to people, they are presented and it either makes sense or it doesn’t." If mortgage lenders treat reverse mortgages as just another product in their arsenal and not as the special estate planning tool that it is, we will be seeing the abuses of the elderly of epic proportion in the coming years.

NOTE TO MORTGAGE LENDERS: (In Massachusetts and elsewhere): Make the connection between a compassionate elder law lawyer that cares about the protection and well being of the elder community and the closing of a reverse mortgage (invite them to go out with the title company or loan originator to check on the borrower’s well being.) Be like those far away ship captains knowing that their loves ones are safe in the hands of a Boston lawyer focused on nothing more than their well being. Don’t be swayed by what makes you happy in the forward world. (beer, donuts, golf?), what will make you a happy lender in the reverse mortgage industry is tea, stale cookies and bingo.

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